As Europe waits to see if Russia will resume gas flows through the Nord Stream Pipeline following its shutdown for planned maintenance, Russian President Vladimir Putin has indicated flows will resume, but only in tightly limited quantities until a sanctioned part which had been trapped overseas is returned so it may be installed.
President Putin’s statement is seen as the strongest signal yet Russia intends to restart flows. On Wednesday, early data showed orders for gas via the pipeline being processed for Thursday, which shows buyers also expect the pipeline to reopen, at least in limited fashion. The orders appeared based on an assumption that gas flows will return at the 40% of capacity they were flowing at prior to the maintenance shutdown. Gazprom refused to comment on order data.
For his part, Putin made clear that flows will be limited at 20% of capacity starting next week, until such time as a turbine that had been trapped in Canada is returned to Russia so it may be installed.
Starting next week, another part will need to be removed and shipped out for maintenance, and absent the part that had been trapped in Canada, the pipeline will only be able to operate at 20% of flow capacity. Currently the part which was trapped in Canada is supposedly on its way home from Canada to Germany, who will ship it on to Russia on its arrival.
Putin said, “If another comes, two will operate. If not, just one, so 30 million cubic meters will be pumped per day.”
Putin indicated he wants not only the part, but all of the proper documentation for it. On Wednesday, state energy company Gazprom PJSC said it has yet to receive any of the correct documentation regarding the part, which will be required to certify its installation.
Traders struggled to discern the meaning of Putin’s statements, since the fact flows will return is seen as positive for supply, but the conditions he placed upon it added an element of uncertainty, causing gas prices to fluctuate.
Tim Ash, a senior strategist at Bluebay Asset Management said, “It’s absolutely clear that Moscow is cutting supplies for geopolitical reasons — it wants to create a European gas crisis this winter to bring Europe to its knees to the point where it cuts support to Ukraine.”
Present gas flows are fully shut down as the pipeline undergoes maintenance. Prior to the shutdown, flows were at 40% of capacity due to the part trapped overseas. Russia has also curbed flows through other routes, such as through Ukraine.
It is expected gas traders and policy makers will all be waiting to see if gas flows resume.
On Monday, Russia’s state-owned Gazprom energy company had notified European clients it was declaring Force Majure on all gas contracts, saying that due to circumstances outside of its control, it would not be able to guarantee delivery of gas supplies to clients in Europe.
European governments have been saying for a week they did not expect gas flows to resume from the Nord Stream Pipeline following the completion of maintenance, and currently they are operating on an assumption the pipeline will not reopen.
The threat of a gas cutoff is weakening the euro and heightening fears of a recession, especially in Germany, where its industrial economy is dependent on gas supplies from Russia. On Wednesday, the IMF warned that Germany stood to see a 5% decline in its economic output if Russia cut off its gas supplies.
In addition, Germany has been planning warm-up shelters for citizens to go to in the event there is not enough gas to heat people’s houses in the winter.
